Brazil Mulls Measures to Spur Auto Lending

The Brazilian government may encourage banks to loosen up on auto loans in an effort to reverse declining vehicle sales and avoid layoffs in the auto industry.

Carmakers sold 257,900 vehicles in Brazil last month, down 11% from April 2011, says local trade group ANFAVEA. Vehicle inventories have reached a five-year high.

ANFAVEA blames the sales slump on a lack of credit. About 70% of the country's car transactions are financed by loans. The trade group appealed to the finance minister last week to ease credit conditions.

The central bank could reduce reserve requirements for banks that use the freed-up funds to make auto loans, according to O Estado de S. Paulo. Another newspaper, Valor Economico, says the finance ministry may cut transactions tax on car loans.

Fiat and Volkswagen are the top-selling automakers in Brazil, followed by General Motors, Ford and Renault.